Nearly half of schemes, 48 per cent, have not set an investment budget for its DC default fund, a PLSA audience poll has found.


Of the respondents that do, 16 per cent set their investment budget at more than 21bps, and 13 per cent had it set at 16-20bps, followed by 10 per cent at 6-10bps. Six per cent of respondents set their investment budget at 11-15bps, with the same number setting it at 0-5bps.


Commenting on NEST's setting of a DC fault fund investment budget, NEST Corporation director, investment development and delivery, Paul Todd, stated it was a good discipline for the scheme to have.


“We found it to be a really good discipline because there is a real danger you can get drawn into debates about paying an extra few basis points to get an extra bit of return, particularly if we are having conversations with hedge fund managers and debates about performance fees,” he explained. “All of this becomes quite challenging if you are trying to keep costs down and still provide value for money.”

The investment budget forms part of NEST's three elements of optimising its asset allocation, Todd added. The elements are to achieve the scheme's return objectives, to achieve this within its risk budget and finally to achieve it within its investment budget.

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